BUSINESSES bidding for a slice of the federal government’s $2.55 billion Emissions Reduction Fund (ERF) will be flying blind after the regulator decided to keep the benchmark price private.

Clean Energy Regulator chief executive Chloe Munro will announce on Friday the first auction will be held on April 15 and 16.

Business groups have expressed concern that not publishing the benchmark price before the first auction could result in many parties sitting out because of uncertainty over whether their bids will be ruled out as too expensive.

But in an interview with The Australian Financial Review, Ms Munro said she was not concerned about that happening.

“Most bids in the first few auction rounds will come from participants in the Carbon Farming Initiative””The provision was included really only as a precaution in case the first auction was likely to be inhibited,” she said.

“If there were unrealistic expectations in the market, where we could see that potential participants had a really inappropriate idea of where the benchmark might be, if that were the case we would have had to address that to make sure there was enough confidence to actually come forward and bid, but we don’t see evidence of that.

“Our intention is to keep the benchmark confidential.”

The process for calculating the price will not be disclosed and the regulator did not have a predetermined price in mind.

The auction process will be conducted by AusTender. In “reverse auction” style, bids will be ranked by the price per tonne of carbon abatement they are offering, from cheapest to most expensive. Eighty per cent of the volume of abatement on offer that comes under the benchmark price will be accepted.

Ms Munro said most bids in the first few auction rounds would come from participants in the Carbon Farming Initiative, whose projects may have been running for some time.

“We are very comfortable with that position. We know there are plenty of projects there that are operating and we think it’s good they have an early opportunity to secure a contract provided they are competitive. So what we expect will happen is as new methods are made, the market will develop in waves.”

The regulator has flexibility to delay or bring forward subsequent auctions in response to demand and is likely to wait until there is an indication that a number of new projects are ready to go before the second auction is announced.

With the first auction just over two months away, Ms Munro confirmed no work had been done to forecast the total carbon abatement that the ERF might deliver. Environment Minister Greg Hunt has avoided the question, saying only that the government was confident it would exceed its target of a 20 per cent cut in emissions on 2000 levels by 2020. The government must put forward its post-2020 targets before the next global climate summit in Paris in December this year.

“I think the way to look at it is simply this: that our job is to purchase as much abatement as we can with the funds available,” Ms Munro said.

Once the results of the auctions started to come through and promised abatement was added together, it would become clear how much the fund was likely to deliver, she said.

“What matters is that we have signed up those contracts and that we have confidence those contracts will be delivered, so cumulatively we will be able to say this is the amount of abatement and this is the average weighted price that we committed to and those are the facts and that is what we are focusing on.”

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